Legendary Investor Bill Miller's Fund Is Loading Up on This 6.3%-Yielding Dividend Stock. Here's Why I Plan to Buy More of It, Too.

Many investment managers have a hard time beating the S&P 500. Not Bill Miller. When he ran Legg Mason Capital Management's Value Trust, Miller delivered higher returns than the S&P 500 for 15 consecutive years, from 1990 to 2005.

Miller founded Miller Value Partners and served as its chairman and chief investment officer through May 2023. He passed the baton to his son, Bill Miller IV, who is carrying on the family legacy.

Miller Value Partners' investment portfolio includes 34 stocks. The hedge fund added only three new positions in the first quarter of 2025. What was its biggest new holding? Verizon Communications (NYSE: VZ).

Image source: Verizon Communications.

Trading telecom leaders

Verizon isn't the only telecommunications giant in Miller Value Partners' portfolio. The fund also owns a position in AT&T. However, it reduced the stake in AT&T by roughly 78% in the first quarter. AT&T is now Miller Value Partners' seventh-smallest holding.

The younger Miller seems to be trading telecom leaders, though. He initiated a new position in Verizon in the first quarter, buying 198,000 shares. This stake in Verizon was worth $8.98 million as of March 31, 2025.

That might not seem like a huge amount, especially considering Verizon's market cap of nearly $183 billion. However, it's a big deal for Miller Value Partners. In one fell swoop, Verizon became the hedge fund's eighth-largest position, making up 4.09% of its total portfolio.

Verizon's appeal

Why did Miller Value Partners find Verizon so appealing? Just look at the hedge fund's middle name: value.

Verizon's shares trade at a forward price-to-earnings ratio of only 9.2. By comparison, AT&T's forward earnings multiple is 13.4 -- nearly 46% higher.

But Verizon isn't a value trap. The company's business is rocking along steadily. Verizon reported year-over-year growth on both the top and bottom lines in the first quarter. Its wireless service revenue of $20.8 billion led the industry. The company had its best wireless retail core prepaid net additions since it acquired TracFone in 2021. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was the highest ever, with the strongest growth rate in nearly four years.

Even better, Verizon's growth could accelerate in the not-too-distant future. The company expects to close its acquisition of Frontier Communications in early 2026.

I suspect Bill Miller III and his team also liked Verizon's dividend. In addition to the juicy yield, Verizon has increased its dividend payout for 18 consecutive years. The company appears to be in a good position to keep that streak going, with its free cash flow soaring to $3.6 billion in the first quarter of 2025 from $2.7 billion in the prior-year period.

I plan to buy Verizon stock, too

While Miller Value Partners only recently initiated a position in Verizon, I've owned the telecom stock since last year. Why do I like Verizon? For the same reasons that Bill Miller III probably likes the stock. Its valuation is attractive. Its business is solid. Its free cash flow is growing. Its growth should accelerate. And its dividend is high.

Is there anything not to like about Verizon? Sure. I'm not enthused about the company's debt load. Verizon had net unsecured debt of $115.1 billion at the end of the first quarter of 2025.

On a positive note, this is $11 billion lower than the net unsecured debt in the first quarter of 2024. Verizon's net unsecured debt to consolidated adjusted EBITDA also improved year over year. Additionally, CFO Anthony Skiadis said in the Q1 earnings call that the company has "a clear pathway for meaningful debt reduction ahead of the closing of the Frontier transaction."

Overall, I think the pluses for Verizon outweigh the minuses. I plan to buy even more shares of this telecom giant soon.

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Keith Speights has positions in Verizon Communications. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.